Shelter

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The U.S. entered the 21st century with a booming housing sector characterized by rapidly expanding homeownership, record home sales, strong house price appreciation, and vigorous housing construction. During the 1997-1999 period, more households became homeowners than in any other three-year period in history. Then in 2007, the great housing bust began, and by 2008, many of the gains of the boom years melted away in waves of foreclosures as home prices fell back to earth and millions of homeowners found themselves under water with their mortgages pegged at higher valuations than their houses. The Case-Schiller Index has been keeping track of this dismal story, and the numbers of foreclosures are tracked by the Mortgage Bankers Association (see the National Delinquency Survey, and scroll down to “news” for the latest report.)

What happened? The best account is Chain of Blame (2008) by Paul Muolo and Mathew Padilla, both experts in the US housing sector and on Wall Street where the trouble began to spread to the whole world. They explain how interest rates by the Federal Reserve during the late 1990s, to ease the crash of the dot.com bubble, had begun to pump up the housing bubble by 2003. Lax regulation of non-bank mortgage lenders led to the mountains of risky, sub-prime loans, also encouraged by the Bush administration in 2005, relaxing the rules of the Community Reinvestment Act of 1977. As Fannie Mae and Freddie Mac joined in the sub-prime orgy, Wall Street firms provided the fuel by securitizing all these loans into mortgage-backed securities which they sold on to investors around the world.

As of December 2008, few were willing to bet when housing prices would bottom out, although everyone seemed to agree that the US recession would not end until this bottom was reached. As I have been commenting on Current Issues, Treasury Secretary Paulson’s $700 billion TARP program, after many twists and turns, has done little to arrest foreclosures while thwarting FDIC Chair Sheila Bair’s pragmatic program of re-negotiating mortgages from expanding. Homeowners still wait for help while banks who have received over $230 billion from US taxpayers are hoarding this cash or acquiring other banks rather than lending it out. Relief, it seems, must wait for the Obama Administration. Meanwhile, the Calvert-Henderson Shelter Indicator reveals that while the great majority of Americans are still well-housed, housing-related problems, particularly affordability, are widespread, and spatially concentrated poverty persists. Inequality is nowhere more evident than in the persistent disparities in shelter across racial and ethnic groups.